PRIVACY REGULATION CRITICIZED IN A STUDY
8.29.2001 The Center for Democracy and Technology concluded in a study that many consumers going online for financial services are confused with respect to how they can control their personal data. The privacy practices of 100 financial firms were reviewed. The non-profit group found that 34 of the firms shared customer information with third parties without giving such customers adequate control over their information. First Union was praised for its privacy practices, especially because it provides multiple methods for their customers to opt out of First Union sharing their information. It criticized financial institutions that require their customers to call a toll free number to opt out of information sharing.
Please click http://www.cdt.org and click "Online Banking Privacy Report" to access the above-referenced report.
Back To The Top
ICI DENIED RULEMAKING PETITION THAT WOULD REGULATE FOLIOS
8.27.2001 The SEC denied the Investment Company Institute's petition to regulate folios (also called portfolio investment programs) as investment companies. In a folio, the investor can make their own investment decisions regarding the make-up of the folio. The investor is also the beneficial owner of the securities in his or her folio. The ICI mainly focused on FOLOfn, a Vienna, Virginia based broker-dealer that offers custom-made securities portfolios called "folios." The SEC believed that these were characteristics that distinguish folios from investment companies. The SEC countered the ICI's argument that folios create regulatory concerns by noting that sponsors of folios are required to register as broker-dealers and subject to a variety of security regulations. The SEC stated that it would monitor the evolution of folios to see if additional regulation is warranted in the future.
Please click http://www.foliofn.com/content/press/press_release_sec.shtml to access a copy of the press release issued by FOLIOfn commenting on the SEC's denial of the ICI's petition.
ICAA PROPOSES CHANGES TO THE INVESTMENT ADVISERS ACT'S ADVERTISING RULE
8.21.2001 The Investment Counsel Association of America (ICAA) sent a letter to the SEC calling for substantial revisions to the rules under the Investment Advisers Act of 1940 that govern advertising. The ICAA argues that the SEC's ban on client testimonials and other prohibitions should be lifted. In its place, the ICAA believes that a general antifraud standard should be adopted which would be similar to Rule 156 under the Securities Act of 1933. In addition, the ICAA letter calls for minimum standards for performance reporting, which would result in retail clients receiving more standardized performance. Lastly, the letter urges the SEC to issue an interpretative release that covers and updates SEC positions on advertising scattered across numerous no-action letters.
Please click http://www.icaa.org/html/comments___statements.html and click "ICCA Proposal Re: Investment Advisers Act Advertising Rule" to access a copy of the letter to the SEC.
Back To The Top
SEC ADOPTS BROKER-DEALER REGISTRATION RULES FOR SECURITY FUTURES TRADERS
8.21.2001 The SEC adopted Rules 15a-10 and 15b11-1 under the Securities Exchange Act of 1934 (Exchange Act), a new Form BD-N, and amendments to Rule 15b2-2 under the Exchange Act, which allow persons that trade in security future products to register by notice with the SEC. The new rules and form implement various provisions of the Commodity Modernization Act. Security futures are futures on individual securities and certain narrowed-based security indexes. Security futures are regulated both as futures for purposes of the Commodities Exchange Act and securities under the federal securities laws. This gives the CFTC and the SEC joint jurisdiction over these instruments.
Security futures are required to be traded on trading facilities and through intermediaries that are registered both with the SEC and the CFTC. These two regulatory agencies have created a system of notice registration that allows a trading facility or intermediary that is already registered with either the SEC or the CFTC to register with the other agency on an expedited basis for the limited purpose of trading security futures products.
New Rule 15b11-1 provides that a CFTC registered entity may register with the SEC by filing a Form BD-N with the SEC. A registrant on this form must indicate that it satisfies all of the eligibility conditions for notice registration.
New Rule 15a-10 exempts persons or entities that engage in security futures product transactions from registering as a broker-dealer with the SEC, regardless of the market on which such products are listed or traded.
The SEC also amended Regulation S-P to make certain of its provisions applicable to activity regulated by the CFTC. A futures commission merchant and introducing broker that are registered by notice as broker-dealers can comply with Regulation S-P by meeting the requirements of the CFTC's privacy rules.
Please click http://www.sec.gov/rules/final/34-44730.htm to access a copy of the release adopting the registration rule.
Back To The Top
CALIFORNIA HEDGE FUND ADVISER CONVICTED OF MONEY LAUNDERING IS BARRED FROM THE INDUSTRY
8.15.2001The SEC barred Alexander Lushtak of San Francisco, California from associating with any investment adviser. He was also required to pay back $239,000 he obtained fraudulently from his clients. Mr. Lushtak is currently serving a 71-month sentence for money laundering. He conducted his fraud through a hedge fund that he and others managed by arranging for the fund to buy shares of a Lithuanian bank that he controlled. He pocketed investor proceeds instead of investing the investors' funds into the hedge fund.
Please click http://www.sec.gov/litigation/admin/ia1968.htm to access a copy of the SEC's administrative action against Mr. Lushtak.
Back To The Top
SEC ADOPTS RULES FOR SECURITY FUTURES PRODUCTS EXCHANGES
8.14.2001 The SEC adopted Rule 19b-7 and Form 1-N under the Securities Exchange Act of 1934 (Exchange Act) that streamline the SEC registration process for an exchange that lists or trades securities futures products. Exchanges may rely on the rule if they are a board of trade designated as a contract market or are registered as a derivative transaction execution facility. The expedited process is not available for exchanges that act as a market place for transactions in other kinds of securities.
A futures market electing to register may, in some cases, submit documents to the SEC that were previously filed with the CFTC. Form 1-N also requires information about the exchange regarding its operations that relate directly to its proposed trading of security futures products.
Please click http://www.sec.gov/rules/final/34-44692.htm to access a copy of the release announcing the registration rule for exchanges.
Back To The Top
CALIFORNIA ADVISER CHARGED WITH MISAPPROPRIATING CLIENT FUNDS
8.13.2001 David Clark Stewart, an unregistered investment adviser, was barred from associating with any investment adviser because he, among other things, misappropriated $356,000 of client funds. Mr. Stewart, located in Santa Monica, California, had managed over $3 million of assets for approximately 25 clients from 1996 to 1999. He allegedly purchased two homes and several cards with the misappropriated funds.
Please click
http://www.sec.gov/litigation/admin/ia-1965.htm
to access a copy of the SEC's administrative action against Mr. Stewart.
Back To The Top
ADVISER SETTLES PORTFOLIO-PUMPING CASE
8.10.2001 The SEC settled a portfolio-pumping case with Angelo Iannone, the former head of international equities sales trading at ABN AMRO, and Andrew Parlin, a former principal and portfolio manager at Oechsle International Advisors. The SEC found that on the last trading days of the second and third quarters of 1998, Parlin placed large buy orders in securities owned by his clients. The orders were placed just prior to the close of the market in an attempt to reach a higher price (sometimes called "marking the close"). In some cases, these orders resulted in the short-term increase in the overall value of the securities held in his advisory client accounts because they represented up to 50% of the volume of the securities traded that day. Iannone and Parlin had numerous conversations about portfolio-pumping strategies.
Iannone agreed to pay a $75,000 civil penalty and was suspended form associating with a broker-dealer for one year. ABN AMRO, his former employer, was censured because of its failure to have adequate systems to implement certain of its trading policies and procedures and to supervise Iannone. It was also fined $200,000. ABN AMRO has instituted new procedures, including requiring any large order in the final 30 minutes of trading to be reviewed and approved by a supervisor.
Parlin agreed to pay a $75,000 civil penalty and was suspended form associating with an investment adviser for one year. Oechsle International, his former employer, was censured because of its failure to supervise Parlin. It was also fined $200,000. Oechsle International now requires all equity trades to be placed by its trading department, not by portfolio managers.
Please click http://www.sec.gov/litigation/admin/34-44679.htm to access a copy of the SEC's administrative action against Mr. Parlin.
Please click http://www.sec.gov/litigation/admin/34-44678.htm to access a copy of the SEC's administrative action against Mr. Iannone.
Please click http://www.sec.gov/litigation/admin/34-44677.htm to access a copy of the SEC's administrative action against ABN AMRO.
Please click http://www.sec.gov/litigation/admin/ia-1966.htm to access a copy of the SEC's administrative action against Oechsle International.
Back To The Top
OREGON ADIVSER'S REGISTRATION REVOKED
8.10.2001 In a series of administrative actions, the SEC revoked the registration of Capital Consultants LLC and barred two of its principals - Barclay Grayson and Jeffrey Grayson-from the advisory industry for five years. The SEC alleged that the Graysons operated a Ponzi scheme where client investments were used to make interest payments on other clients' investments. Capital Consultants is located in Portland, Oregon.
Please click http://www.sec.gov/litigation/admin/ia-1964.htm to access a copy of the SEC's administrative action against Jeffrey Grayson.
Please click http://www.sec.gov/litigation/admin/ia-1963.htm to access a copy of the SEC's administrative action against Capital Consultants.
Please click http://www.sec.gov/litigation/admin/ia-1962.htm to access a copy of the SEC's administrative action against Barclay Grayson.
Back To The Top
MASSACHUETTS ADVISER AND MUTUAL FUND VIOLATE NUMEROUS SECURITIES LAWS
8.9.2001 Charles Dyer of Manchester, Massachusetts, and a mutual fund managed by Dyer settled with the SEC in a case where numerous provisions of the Investment Company Act of 1940 and Investment Advisers Act of 1940 were violated. For example, numerous books and records rules and corporate governance rules were violated. The mutual fund also failed to file required reports with the SEC and send annual reports to shareholders. Mr. Dyer was suspended from associating with an investment company and investment adviser for one year and fined $25,000.
Please click http://www.sec.gov/litigation/admin/ia-1961.htm
to access a copy of the SEC's administrative action against Mr. Dyer.
Back To The Top
ADVISER CHARGED WITH ILLICIT TRADE ALLOCATION
8.9.2001 Alan Bond is alleged to have engaged in trade allocation that resulted in his clients losing nearly $57 million and Mr. Bond earning $6.6 million. Mr. Bond was a frequent guest on financial news stories. The SEC alleged that Mr. Bond cherry-picked the best trades by placing trades in the morning without designating particular accounts. If the securities acquired appreciated during the day, he allegedly would allocate them to his account. Securities that went down in price would be placed in client accounts. The SEC filed the enforcement action in federal court in New York.
Please click http://www.sec.gov/litigation/litreleases/lr17099.htm to access the release announcing the SEC's administrative action against Mr. Bond.
EDGAR FILER MANUAL UPDATED
8.7.2001 The SEC updated the EDGAR filing manual. Existing volume one was eliminated because the Legacy version of the systems is now outdated. Volume two and three have been re-numbered volume one (Modernized EDGARLink) and two (N-SAR Supplement). Volume one contains technical formatting requirements for the preparation and submission of EDGAR filings. Volume two governs the N-SAR filings.
Please click http://www.sec.gov/rules/final/33-7999.htm
to access a copy of the release announcing the amendments to the SEC's EDGAR filer manual.
Back To The Top
For more news, please click MORE NEWS.
